Free bus passes and winter fuel allowance for OAPs 'cost £3bn and do nothing for economy', says leading think tank

Pensioners should be stripped of winter fuel allowance and free bus travel because it costs too much, a leading think tank has claimed.

The Social Market Foundation (SMF) claims that the £1billion annual cost of OAP bus travel and £2billion cost of the winter fuel allowance does nothing to improve the economy and should be cut by the government as it tries to slash spending.

The proposal prompted anger from charities who say that for many, the payments 'mean the difference between life and death'.

Axing free bus travel for the over 60s would save the Government £1billion a year, think tank Social Market Foundation has claimed

Ros Altmann, director general of over 50s specialist Saga, said: 'To suggest stopping pensioners from using buses for free is short-sighted and not the best way to stimulate the economy.

'It would leave pensioners with less to spend on other things and prevent many who are already struggling financially on the inadequate state pension from getting out and about and keeping fit.

'In the long-term this would lead to more isolation and health problems - creating increased demand on the NHS.'

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A recent survey, commissioned by Saga, showed 87 per cent of pensioners felt their free buses were vitally important and a further 90 per cent said the same about their winter fuel allowance.

Ms Altman said: 'Instead of suggesting policies that would only see a benefit in the short-term the Government should be using the money in pension funds to stimulate growth in the economy.'

The Winter Fuel Allowance is currently set at £200 for households with pensioners aged 60 to 79 and £300 for households where at least one person is 80 or over to help towards the cost of electricity and gas. The payment is made irrespective of how much money they have, leading some to suggest it should be means tested.

Ros Altmann, director general of over 50s specialist Saga, says the proposals by the Social Market Foundation are short-sighted

But Independent Age director of policy
Simon Bottery argues that the fuel allowance is essential.

He said: 'The Winter Fuel Payment is essential for many
older people - we still see over 20,000 excess deaths in the winter.

'We
would oppose any plans to make it available to only those on Pension
Credit since a third of our poorest pensioners still don’t claim Pension
Credit.

'Under these
proposals, they would lose out on a benefit which could mean the
difference between life and death. There is no reason why wealthier
pensioners shouldn’t be encouraged to voluntarily give up their Winter
Fuel Payment – and such campaigns do already exist.'

It claimed the cuts would save the Government £15billion and provide a much needed boost for the economy without increasing borrowing.

SMF argues that OAP travel passes - which cost an estimated £1 billion a year - was a low-priority and does nothing to improve the economy.

The SMF also urged for savers to be stopped from keeping any more than £15,000 in tax free ISA accounts to save £1billion and for child benefit to be means tested to save a further £2.4billion.

The think tank added added that halving the higher rate pension tax relief would account for almost half of the £15billion sum while means testing winter fuel payments would save £2billion and free television licences from better-off pensioners would make up the rest.

Age UK also expressed concern over the proposals.

The group's Director General Michelle Mitchell said: 'Already many older people live on the very fringes of our communities and we should be doing more to combat their isolation, not taking away their means to play a more fulfilling role in society.

'One third of all older households are in fuel poverty and many others are struggling to meet their bills, causing them huge anxiety and often forcing them into making decisions that affect their health. The winter fuel payment is is a lifeline, especially during a time of high fuel prices.'

But the SMF argues the measures would offer a £10billion boost to economic activity over each of the next three years, without altering the existing deficit reduction plan.

The think tank claims the money saved
from the cuts could 'be channelled into transport and energy
infrastructure projects that are vital for economic growth'.

It believes that its proposals would stimulate the economy twice as much
reversing last year's VAT rise and three times more than increasing the
personal tax allowance to £10,000 - which several Liberal Democrats are
currently campaigning for.

But older age charities have criticised the suggestion - claiming that free bus travel is vital for many pensioners, who couldn't afford to get around independently otherwise

SMF director Ian Mulheirn, who wrote
the report, said: 'The political debate on the economy has become
unhelpfully polarised, with the future strategy presented as a choice
between sticking to the status quo or borrowing more in pursuit of
growth.

'But the OBR's
game-changing assessment last November that there will have to be a
further £15bn of cuts by 2016-17 creates the opportunity for a potent
growth strategy within the existing borrowing plans.

'By changing the composition of Government taxation and spending, rather than altering the size and speed of cuts, the Chancellor can make his existing plan much more growth-friendly.

'Our plan would unambiguously strengthen the Government's deficit cutting credibility and increase economic output without borrowing a penny more. That would go a long way towards reassuring the holders of UK Government debt as well as potentially taking tens if not hundreds of thousands of people out of unemployment.

'By refreshing our infrastructure, this plan would also lay the sorely needed foundations of the new economy that must emerge from the crash.'

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Free bus passes and winter fuel allowance for OAPs cost £3bn and do nothing for economy, says leading think tank